Correlation Between Tplex and Keum Kang
Can any of the company-specific risk be diversified away by investing in both Tplex and Keum Kang at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tplex and Keum Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tplex Co and Keum Kang Steel, you can compare the effects of market volatilities on Tplex and Keum Kang and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tplex with a short position of Keum Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tplex and Keum Kang.
Diversification Opportunities for Tplex and Keum Kang
Average diversification
The 3 months correlation between Tplex and Keum is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tplex Co and Keum Kang Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keum Kang Steel and Tplex is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tplex Co are associated (or correlated) with Keum Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keum Kang Steel has no effect on the direction of Tplex i.e., Tplex and Keum Kang go up and down completely randomly.
Pair Corralation between Tplex and Keum Kang
Assuming the 90 days trading horizon Tplex Co is expected to generate 1.0 times more return on investment than Keum Kang. However, Tplex Co is 1.0 times less risky than Keum Kang. It trades about -0.08 of its potential returns per unit of risk. Keum Kang Steel is currently generating about -0.12 per unit of risk. If you would invest 330,000 in Tplex Co on August 29, 2024 and sell it today you would lose (21,500) from holding Tplex Co or give up 6.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tplex Co vs. Keum Kang Steel
Performance |
| Timeline |
| Tplex |
| Keum Kang Steel |
Tplex and Keum Kang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tplex and Keum Kang
The main advantage of trading using opposite Tplex and Keum Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tplex position performs unexpectedly, Keum Kang can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Keum Kang will offset losses from the drop in Keum Kang's long position.The idea behind Tplex Co and Keum Kang Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Keum Kang vs. LG Chemicals | Keum Kang vs. Lotte Chemical Corp | Keum Kang vs. Hyundai Steel | Keum Kang vs. Seah Steel Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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